We’re entering the tail end of the year, a historically strong period for small caps. But this year could be different. Wolfe Research strategist Rob Ginsberg pointed out that one-third of Russell 2000 stocks are flashing a sell signal in terms of the moving average convergence/divergence technical indicator. “The past few instances of this have marked near term peaks,” Ginsberg wrote. This comes as the small-cap benchmark has struggled lately. Since hitting an all-time intraday high on Nov. 25, the Russell 2000 has fallen nearly 3%. The S & P 500 , meanwhile, has scaled new heights in that time and is up more than 1.5%. .RUT YTD mountain Russell 2000 year to date Small caps raced higher after Donald Trump secured a second presidential term before their recent pullback. The benchmark is still up more than 5% since the election. And Ginsberg thinks there’s still a chance for a year-end rally for the group. It just may take more time before it starts. “The question of the hour seems to be ‘do we rally into year end?’. History would imply yes. Between 1994-2023, the last two weeks of the year saw the Russell 2000 up ~2% on average,” he said in a note. “The Russell 2000 continues to peel back since briefly breaking out to a new high. With support at 2300 … we anticipate this pullback presenting a buying opportunity — but as we know, timing is always tough,” he added. Elsewhere Thursday morning on Wall Street, Deutsche Bank upgraded Coca-Cola , PepsiCo and Keurig Dr Pepper , saying 2025 will be a strong year for nonalcoholic beverage stocks. “If there is one area where we are more optimistic on the potential for accelerating trends heading into 2025, it resides in restaurant/[convenience] store traffic and more impulse purchasing — dynamics that should work to the advantage of companies operating in the beverage (and snacks) industry with elevated exposure to such channels. KO, PEP, and KDP … all fit this profile,” analyst Steve Powers said.
Why a Santa Claus rally for small-cap stocks is looking shaky